Indian outsourcing becomes unstuck

The once buoyant Indian IT industry appears to be continuing to slide.This week the IT industry association Nasscom has forecast that in 2013 there will be 50,000 fewer jobs available.

Nasscom insists that the lower number is not because of a slow down, but it claimed it was mostly because of economic uncertainties. It claimed that the huge outsourcing deals that Indian companies were picking up are a thing of the past.

Deal sizes are much smaller. It also suggested that the depressed US and European markets are no longer making Indian companies the sort of money they are used to.

“It is the non-English speaking markets that will drive the additional growth this year. We are expecting the Asean, Africa and Latin America to be big market drivers,” the report said.

Nasscom President Som Mittal was quoted as saying that jobs will come this year but the numbers will come down. Another strange thing is that Indian companies are no longer looking for the single skill workers but those who can use technology platforms.

But for those who have worked in the outsourcing industry, this is a sign that things are not well in India. Saying you are moving to developing countries is all very well, but outsourcing projects depends on projects being there in the first place. It is rare for a company to approach an outsourcer and say we want something done, we don’t know what it is and we have no idea how much it would really cost. Instead, the Indian outsourcing market has been built on the back of companies not wanting to run existing operations.

For the Indian outsourcers to go into developing nations they will have to re-orientate themselves to selling packages of products to people who have no history of using them. Not impossible, but difficult. It would probably be better for the Indian outsourcers to try and ride out any recession in the US or Europe rather than restructure.

According to the India Times Nasscom has been asking the government to “reduce business friction” which is short hand for tax breaks and other sweeteners. These could make it possible to function in the short term until things pick up. Such a cunning plan would have a side effect that would show foreign companies that India was a “hub of research and development and innovation”.

One of the difficulties Indian outsourcers have had is convincing big business that they are anything more than call centres. Attempts to build better companies in the region have been stymied by poor infrastructure. However all this means that the once lucrative outsourcing industry in India is on hold, along with the rest of the IT industry.